Next! Personal adventures and observations in the current retail landscape
By Chris Bailey of Financial Orbit | Sunday 16 December 2018
Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
As I have noted before, it is probably a good thing that the UK economy is not based on my personal consumption habits, especially when the highlight of my annual 'pre-Christmas trip to the shops' was purchasing an advent calendar marked down from its original price by over 75%... A very cheap way to buy some good quality chocolates (and - naturally - to ascertain the quality level I had to consume days one to fifteen in one sitting).
Anyhow - moving on from retail arbitrage - a few thoughts from a runaround an Intu (INTU) shopping centre, a company I have written about a number of times in 2018 and who justifiably have had two bids for it fall apart and trades at a big discount to book. Reflecting this, I parked surprisingly easy at around 9.30am and wandered in. Intu certainly have made a bit more of a Christmas effort than in previous years...but that maybe smacks of a bit of desperation too.
First stop was a seasonal drink at one of my investment successes of 2018Costa Coffee (part of Whitbread (WTB)), which famously received an ultimately successful bid from soda behemoth Coca Cola during the year. By far the biggest queue of the morning...although a few minutes away I noted Patisserie Holdings' (CAKE)key asset Patisserie Valerie surprisingly busy too. Apparently as per the lady at the till it has been similarly rammed for the last few Christmas Saturday mornings... Let them eat cake I guess. There is a business here to save.
Then onto a couple of Mike Ashley interests - and no wonder the recent Sports Direct (SPD) numbers were heavily influenced by the red ink of House of Fraser. The ever-helpful cashier (yes, I did spend some money there - well there are bargains available quelle surprise) said staff had been halved, everything was on sale but that bargain hunters had been in force for the last few days. I have to say Debenhams (DEB) felt less anarchic and better staffed but it was a relative ghost town in there. They are trying but I kind of felt that - a bit like Woolworths in its last few years - if it did not exist, you would not have created it. Lots of sales signs around too...
Final stop of the day was to a proper retail business Next (NXT). I have loved up the stock on these pages before and traded it well, initially trading it between 40 and 50 quid and more latterly between 50 and 60 quid. Well right now the shares are in the 43 and change quid area which feels a bit rude, given the strong shareholder remuneration and balance sheet, 'no fashion miss' orientation and retail sector experience.
Of course since the end of October solid trading update, the retail shambles noted by the aforementioned Mike Ashley has hit and sector dogs such as Superdry (SDRY) and Bonmarche (BON) have updated disastrously. Next felt very normal, nicely busy, well laid out, not too aggressive on the lurid sales signs. Maybe it is because I received a nice jumper from Next for my birthday recently or because it was actually a bit nippy outside, but i came away with the thought that if there was any new stock my little retail runaround would induce me to buy in the current apocalypse sentiment to the space...it would be Next.
Of course the prudent will wait for the early January update...but it is the season of perpetual hope after all! Call me mad...but buying a starter position in Next here if you don't - like me - currently hold it does not seem too crazy at all.
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